Blazek & Vetterling

Jody Blazek CPA Blazek & Vetterling November 15, 2017 ADVOCACY and LOBBYING Jody Blazek CPA Blazek & Vetterling November 15, 2017 CenterPoint Energy Blazek & Vetterling

IMPACT of ADVOCACY on TAX-EXEMPTION Internal Revenue Code §501(c)(3) Charitable Organizations must expend “substantially all” of their funds on conducting the purposes for which they were recognized as tax-exempt. To be considered charitable, the organization must focus on education, health, social welfare, culture, and protection of environment, animals, and children. Blazek & Vetterling

IMPACT of ADVOCACY on TAX-EXEMPTION Each tax-exempt §501(c) entity must understand that advocacy promoting the passage of legislation to address, alleviate or reduce a social ill is not necessarily forbidden, except for private foundations. For §501(c)(3) public charities, promoting legislation is permitted, but subject to spending limitations under either an “insubstantial part” or a §501(h) election. Blazek & Vetterling

IMPACT of ADVOCACY on TAX-EXEMPTION CAUTION: A nonprofit whose mission can only be accomplished by influencing legislation, however, cannot qualifying as a tax-exempt under §501(c)(3). ELECTIONEERING – spending >$1 to influence the election of persons to public office is absolutely prohibited for a §501(c)(3)!! Blazek & Vetterling

IMPACT of ADVOCACY on TAX-EXEMPTION Other nonprofits that can qualify for tax exemption without limitations on their lobbying activity include (among others) the following: Social Welfare Organizations §501(c)(4) [Electioneering cannot comprise more than 50% of its expenditures.] Labor & Agricultural Organizations §501(c)(5) Business Leagues §501(c)(6) Blazek & Vetterling

ADVOCACY – Do’s and Don’ts Distinctions between the (c)(3), (4), (5), and (6) categories of exemption are both very distinct and sometimes vague. Charity for (c)(3) purposes means selfless giving of aid and other support with no expectation or receipt of return, or in other words no quid pro quo. Some activities are charitable even though one must pay, like education (having to pay tuition), health services, cultural performances or lectures. Blazek & Vetterling

HOW can (c)(3) PROMOTE its MISSION? This question embodies the following questions : Can nonprofit “advocate” to accomplish mission? When is advocacy in favor or opposition to an issue be treated as educational? When does advocacy instead constitute lobbying? What is consequence of promotion candidates to public office, called electioneering? Blazek & Vetterling

ADVOCACY DEFINED Advocacy is publicly supporting or recommending a particular cause or policy or action. Advocacy is also referred to as providing support for, backing of, or championing of some cause, belief, or person. Many venues can be used to advocate – printed materials (books, pamphlets, mailings), audio announcements on TV, radio, tape recordings, films or movies, announcements at public forums, street corners, and many others. Blazek & Vetterling

ADVOCACY DEFINED Advocacy, whether it is dissemination of information to the public or contacts with legislators and others in government who may participate in formulation of legislation, is a perfectly effective and acceptable tool for communicating the nonprofit’s mission and goals to the public, subject to spending limits. What is not OK is advocating for the election of person to public office, referred to as electioneering. Blazek & Vetterling

ADVOCACY DEFINED Advocacy for purposes of this presentation does not include seeking funds or urging others to support the nonprofit with financial gifts. Issue advocacy is best thought of, and designed to provide, public education on a mission the nonprofit is trying to accomplish and goals it seeks to achieve, short of encouraging changes in law using results of nonpartisan analysis, study, or research of an issues that is the subject of legislation is permissible advocacy. Blazek & Vetterling

ADVOCACY DEFINED Advocacy is a communication that disseminates the results of an organization’s activities, analysis and evaluations of issues, and research on a matter impacting the general public. It may, for example, involve consequence of feeding (or not) the poor, making quality education available to all learners, reducing pollution, or countless other issues. Blazek & Vetterling

How can a nonprofit “advocate in favor or opposition to an issue?” The “how” is of first importance. Different results occur for: Broad public release through brochures, flyers, website, publications and press releases, including those sent to legislators and other government officials. Reports sent only to members Information provided to particular persons who make the laws – a specific legislator and/or their staff Blazek & Vetterling

How can a nonprofit “advocate in favor or opposition to an issue?” Non-lobbying communique = Doesn’t refer to a specific legislative proposal, reflect view on a bill, or encourage readers/listeners to “take action” on an issue or take other steps treated as lobbying. Conducting direct lobbying means supporting a bill begin considered by a legislative entity, visiting with legislators or others involved in approving the bill, and urging others to contact their legislators. Blazek & Vetterling

LEGISLATIVE LOBBYING Lobbying is not the act of promoting the election of the person in a legislative body. It is important to distinguish between lobbying and attempts to influence the election of members of the legislative body that make and amends laws. The public is regarded as a legislative body when the decision is made by the general public in what is usually referred to as a referendum. Blazek & Vetterling

PERMISSIBLE LOBBYING Permissible lobbying can be measured two ways: 1. Substantial part test: Tally of all direct expenditures, both cash and donated costs of programs, overhead, facilities and administration plus value of time of volunteers, board, and friends. All other non-cash costs enabling lobbying efforts are considered with all being compared to total expenditures. The test is vague with no absolute % limitation provided. Blazek & Vetterling

PERMISSIBLE LOBBYING 2. §501(h) Election. A cost limitation method can be elected that specifically counts only direct costs, and not the “softer factors” like volunteer/board time. A sliding scale percentage of the organization’s total Exempt Purpose Expenditures (EPE). Spending in excess is subject to penalty or possible revocation of exemption. Form, 5768 filed to make the election and can be revoked in any future year. Blazek & Vetterling

501(h) Lobbying Limits Permitted % of Exempt Purpose Expenditures (EPE) is: EPE NOT over $500,000 20% of EPE EPE Over $500,000 but not over $1,000,000 - $100,000 plus 15% of the excess over $500,000. EPE Over $1,000,000 but not over $1,500,000 - $175,000 plus 10% of the excess over $1,000,000. EPE Over $1,500,000 but not over $17,000,000 - $225,000 plus 5% of the excess over $1,500,000. EPE Over $17,000,000 $1,000,000. Blazek & Vetterling

501(h) Lobbying Limits Up to 25% of the total direct lobbying allowable can be spent on grass-roots lobbying. Lobbying expenses in excess of limits on the preceding slide result in a 25% penalty under §4911. Four-years of excessive lobbying expenses of more than 150% of limits automatically results in revocation of tax-exemption. Blazek & Vetterling

Examples of Advocacy Children at Risk’s website Speaking Out and Driving Change for Children Our Mission: CHILDREN AT RISK serves as a catalyst for change to improve the quality of life for children through strategic research, public policy analysis, education, collaboration and advocacy. What We Do: Through its research and advocacy programs, CHILDREN AT RISK is a well-known leader in understanding the health, safety and economic indicators impacting children, and educating public policy makers about their importance in improving the lives of children. Blazek & Vetterling

Examples of Advocacy The Heritage Foundation 2017 report A New Strategy for Control of Illegal Immigration We often hear that unless the President's proposal or some similar amnesty plan is adopted quickly, the Republican Party will lose the Hispanic vote. I reject such thinking, and I will reject any legislation that is predicated so blatantly on pandering based on ethnicity or race rather than sound policy for all Americans. The House bill passed last December, Representative Sensenbrenner's H.R. 4437, has been widely called the "enforcement first strategy" to distinguish it from the "comprehensive approach" touted by the proponents of a mass amnesty as found in the Reid-Kennedy bill, S. 2611. Honorable Thomas G. Tancredo (R) represents the 6th District of Colorado in the U.S. House of Representatives. Blazek & Vetterling

Examples of Advocacy Citizens Environmental Coalition posting on next page reflect citizen advocacy initiated by CEC. Consider consequences. Blazek & Vetterling

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